Live in District of Columbia, Work in Montana: Which State Taxes Your Paycheck?
Answer
Two returns, one credit. Montana has the first claim on wages earned inside the state and withholds accordingly. District of Columbia then taxes you as a resident on everything and gives credit for what Montana already took, capped at what District of Columbia would have charged on that same income.
Last verified
Two states can lawfully tax the same wages: Montana because the work happened there, District of Columbia because you live there. Nothing prevents the overlap in advance — it is unwound afterwards, on the District of Columbia return, through the credit for taxes paid to another state.
A District of Columbia resident taxed by another state on the same income claims the credit for taxes paid to other states on Schedule U (Form D-40). The credit is capped at the District of Columbia tax on that income, so it removes the double tax but never refunds the excess when the other state charges more.
What you file
- 1Nonresident return · MontanaForm 2 with the nonresident/part-year schedule
File the Montana nonresident return FIRST — you need the Montana tax figure before you can complete District of Columbia.
- 2Resident return · District of ColumbiaSchedule U (Form D-40)
File a District of Columbia resident return reporting all income, then claim the credit for tax paid to Montana. The credit is capped at what District of Columbia would have charged on that same income, so if Montana taxes it at a higher rate the difference is not refunded.
The two states, side by side
| District of Columbia | Montana | |
|---|---|---|
| Taxes wages | Yes — graduated | Yes — graduated |
| Reciprocity partners | 2 (Form D-4A) | 1 (Form MW-4) |
| Convenience rule | No | No |
| Nonresident return | None — nonresidents exempt | Form 2 with the nonresident/part-year schedule |
| Credit for other-state tax | Schedule U (Form D-40) | Form 2 (credit for income tax paid to another state) |
| Nonresident safe harbour | Not applicable | None published |
| Local income tax | No | No |
| Revenue department | District of Columbia Office of Tax and Revenue | Montana Department of Revenue |
| Last verified |
The other direction
Reversing the commute does not always reverse the answer. Living in Montana and working in District of Columbia gives:Nonresidents are exempt by statute.
Same two states, different situation
The withholding answer turns on how you are paid and where the work happens, not only on which two states are involved.
- Remote worker: District of Columbia → MontanaHome state only
- 1099 contractor: District of Columbia → MontanaHome state, plus the client state if you work there
- Moved mid-year: District of Columbia → MontanaTwo part-year returns
Other District of Columbia pairs
Questions people actually ask
I live in District of Columbia and work in Montana. Which state takes the tax out of my paycheck?
Two returns, one credit. Montana has the first claim on wages earned inside the state and withholds accordingly. District of Columbia then taxes you as a resident on everything and gives credit for what Montana already took, capped at what District of Columbia would have charged on that same income.
Which state should my employer be withholding for?
Montana. The wages are sourced to Montana, so Montana withholding is correct and there is no District of Columbia withholding to set up.
Will I end up paying tax twice on the same income?
Not twice over, but you will pay the higher of the two rates. District of Columbia gives residents a credit for tax paid to Montana on the same income, claimed on Schedule U (Form D-40). The credit is capped at the District of Columbia tax on that income, so if Montana taxes it more heavily the excess is not refunded by either state.
How current is this?
The District of Columbia and Montana rules on this page were last checked against District of Columbia Office of Tax and Revenue and Montana Department of Revenue on 2026-08-07. We re-check the full grid every December after state legislative sessions close, and re-check the convenience-of-the-employer states quarterly because that is where the rules move fastest.
Sources
Every fact above comes from the revenue department that publishes the rule. We do not cite secondary summaries, and we do not restate a figure we could not find at source.
- District of Columbia Office of Tax and Revenue — individual income taxaccessed 2026-08-07
- Montana Department of Revenue — individual income taxaccessed 2026-08-07